HB-5008, As Passed House, April 30, 2008

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

HOUSE BILL NO. 5008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     A bill to enact the uniform securities act (2002) relating to

 

the issuance, offer, sale, or purchase of securities; to prohibit

 

fraudulent practices in relation to securities; to establish civil

 

and criminal sanctions for violations of the act and civil

 

sanctions for violation of the rules promulgated pursuant to the

 

act; to require the registration of broker-dealers, agents,

 

investment advisers, and securities; to make uniform the law with

 

reference to securities; and to repeal acts and parts of acts.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

ARTICLE 1

 

GENERAL PROVISIONS

 

     Sec. 101. This act shall be known and may be cited as the

 

"uniform securities act (2002)".

 

     Sec. 102. As used in this act, unless the context otherwise

 

requires:

 

     (a) "Administrator" means the office of financial and

 

insurance regulation of the department of labor and economic

 

growth.

 

     (b) "Agent" means an individual other than a broker-dealer who

 

represents a broker-dealer in effecting or attempting to effect

 

purchases or sales of securities or represents an issuer in

 

effecting or attempting to effect purchases or sales of the

 

issuer's securities. The term does not include a partner, officer,

 

or director of a broker-dealer or issuer, or an individual having a

 

similar status or performing similar functions, unless the

 

individual otherwise comes within the term. The term does not

 

include an individual excluded by rule or order under this act. The

 

term does not include a person acting solely as a finder and

 

registered as a broker-dealer under this act or acting as a finder

 

in a transaction exempt under section 202(1)(r).

 

     (c) "Bank" means any of the following:

 

     (i) A banking institution organized under the laws of the

 

United States.

 

     (ii) A member bank of the federal reserve system.

 

     (iii) Any other banking institution that meets all of the

 

following:

 

     (A) It is doing business under the laws of a state or of the

 

United States.

 

     (B) A substantial portion of its business consists of

 

receiving deposits or exercising fiduciary powers similar to those

 

permitted to be exercised by national banks under the authority of

 

the comptroller of the currency pursuant to 12 USC 92a.

 

     (C) It is supervised and examined by a state or federal agency

 

having supervision over banks.

 

     (D) It is not operated for the purpose of evading this act.

 

     (iv) A receiver, conservator, or other liquidating agent of any

 

institution or firm included in subparagraph (i), (ii), or (iii).

 

     (d) "Broker-dealer" means a person engaged in the business of

 

effecting transactions in securities for the account of others or

 

for the person's own account. The term does not include any of the

 

following:

 

     (i) An agent.

 

     (ii) An issuer.

 

     (iii) A bank, trust company organized or chartered under the

 

laws of this state, or savings institution if its activities as a

 

broker-dealer are limited to those specified in section

 

3(a)(4)(B)(i) through (vi), (viii) through (x), and (xi) if limited to

 

unsolicited transactions; 3(a)(5)(B); and 3(a)(5)(C) of the

 

securities exchange act of 1934, 15 USC 78c, or a bank that

 

satisfies the conditions described in section 3(a)(4)(E) of the

 

securities exchange act of 1934, 15 USC 78c.

 

     (iv) An international banking institution.

 

     (v) A person excluded by rule or order under this act.

 

     (e) "Depository institution" means a bank; or a savings

 

institution, trust company, credit union, or similar institution

 

that is organized or chartered under the laws of a state or of the

 

United States, authorized to receive deposits, and supervised and

 

examined by an official or agency of a state or the United States

 

if its deposits or share accounts are insured to the maximum amount

 

authorized by federal statute by the federal deposit insurance

 

corporation, the national credit union share insurance fund, or a

 

successor authorized by federal law; or a bank that does not

 

receive deposits because of a limitation in its charter, articles

 

of incorporation, or articles of association. The term does not

 

include any of the following:

 

     (i) An insurance company or other organization primarily

 

engaged in the business of insurance.

 

     (ii) A Morris Plan bank.

 

     (iii) An industrial loan company that is not an insured

 

depository institution, as that term is defined in section 3(c)(2)

 

of the federal deposit insurance act, 12 USC 1813(c)(2).

 

     (f) "Federal covered investment adviser" means a person

 

registered under the investment advisers act of 1940.

 

     (g) "Federal covered security" means a security that is, or

 

upon completion of a transaction will be, a covered security under

 

section 18(b) of the securities act of 1933, 15 USC 77r, or rules

 

or regulations adopted under that provision.

 

     (h) "Filing" means the receipt under this act of a record by

 

the administrator or a designee of the administrator.

 

     (i) "Finder" means a person who, for consideration,

 

participates in the offer to sell, sale, or purchase of securities

 

by locating, introducing, or referring potential purchasers or

 

sellers. Finder does not include a person whose actions are solely

 

incidental to a transaction exempt pursuant to section 202(1)(r).

 

The administrator may by rule or order exclude other persons from

 

this definition.

 

     (j) "Fraud," "deceit," and "defraud" include, but are not

 

limited to, common law deceit.

 

     (k) "Guaranteed" means guaranteed as to payment of all

 

principal and all interest.

 

     Sec. 102a. As used in this act, unless the context otherwise

 

requires:

 

     (a) "Institutional investor" means any of the following,

 

whether acting for itself or for others in a fiduciary capacity:

 

     (i) A depository institution or international banking

 

institution.

 

     (ii) An insurance company.

 

     (iii) A separate account of an insurance company.

 

     (iv) An investment company as defined in the investment company

 

act of 1940.

 

     (v) A broker-dealer registered under the securities exchange

 

act of 1934.

 

     (vi) An employee pension, profit-sharing, or benefit plan if

 

the plan has total assets in excess of $10,000,000.00 or its

 

investment decisions are made by a named fiduciary, as defined in

 

the employee retirement income security act of 1974, that is a

 

broker-dealer registered under the securities exchange act of 1934,

 

an investment adviser registered or exempt from registration under

 

the investment advisers act of 1940, an investment adviser

 

registered under this act, a depository institution, or an

 

insurance company.

 

     (vii) A plan established and maintained by a state, a political

 

subdivision of a state, or an agency or instrumentality of a state

 

or a political subdivision of a state for the benefit of its

 

employees, if the plan has total assets in excess of $10,000,000.00

 

or its investment decisions are made by a duly designated public

 

official or by a named fiduciary, as defined in the employee

 

retirement income security act of 1974, that is a broker-dealer

 

registered under the securities exchange act of 1934, an investment

 

adviser registered or exempt from registration under the investment

 

advisers act of 1940, an investment adviser registered under this

 

act, a depository institution, or an insurance company.

 

     (viii) A trust, if it has total assets in excess of

 

$10,000,000.00, its trustee is a depository institution, and its

 

participants are exclusively plans of the types identified in

 

subparagraph (vi) or (vii), regardless of size of their assets,

 

except a trust that includes as participants self-directed

 

individual retirement accounts or similar self-directed plans.

 

     (ix) An organization described in section 501(c)(3) of the

 

internal revenue code, 26 USC 501, a corporation, Massachusetts or

 

similar business trust, limited liability company, or partnership,

 

not formed for the specific purpose of acquiring the securities

 

offered, with total assets in excess of $10,000,000.00.

 

     (x) A small business investment company licensed by the small

 

business administration under section 301(c) of the small business

 

investment act of 1958, 15 USC 681, with total assets in excess of

 

$10,000,000.00.

 

     (xi) A private business development company as defined in

 

section 202(a)(22) of the investment advisers act of 1940, 15 USC

 

80b-2, with total assets in excess of $10,000,000.00.

 

     (xii) A federal covered investment adviser acting for its own

 

account.

 

     (xiii) A "qualified institutional buyer" as defined in rule

 

144A(a)(1), other than rule 144A(a)(1)(i)(H), adopted under the

 

securities act of 1933, 17 CFR 230.144A.

 

     (xiv) A "major U.S. institutional investor" as defined in rule

 

15a-6(b)(4)(i) adopted under the securities exchange act of 1934, 17

 

CFR 240.15a-6(b)(4)(i).

 

     (xv) Any other person, other than an individual, of

 

institutional character with total assets in excess of

 

$10,000,000.00 not organized for the specific purpose of evading

 

this act.

 

     (xvi) Any other person specified by rule or order under this

 

act.

 

     (b) "Insurance company" means a company organized as an

 

insurance company whose primary business is writing insurance or

 

reinsuring risks underwritten by insurance companies and which is

 

subject to supervision by the insurance commissioner or a similar

 

official or agency of a state.

 

     (c) "Insured" means insured as to payment of all principal and

 

all interest.

 

     (d) "International banking institution" means an international

 

financial institution of which the United States is a member and

 

whose securities are exempt from registration under the securities

 

act of 1933.

 

     (e) "Investment adviser" means a person that, for

 

compensation, engages in the business of advising others, either

 

directly or through publications or writings, as to the value of

 

securities or the advisability of investing in, purchasing, or

 

selling securities or that, for compensation and as a part of a

 

regular business, issues or promulgates analyses or reports

 

concerning securities. The term includes a financial planner or

 

other person that, as an integral component of other financially

 

related services, provides investment advice to others for

 

compensation as part of a business or that holds itself out as

 

providing investment advice to others for compensation. The term

 

does not include any of the following:

 

     (i) An investment adviser representative.

 

     (ii) A lawyer, accountant, engineer, or teacher whose

 

performance of investment advice is solely incidental to the

 

practice of the person's profession.

 

     (iii) A broker-dealer or its agents whose performance of

 

investment advice is solely incidental to the conduct of business

 

as a broker-dealer and that does not receive special compensation

 

for the investment advice.

 

     (iv) A publisher of a bona fide newspaper, news magazine, or

 

business or financial publication of general and regular

 

circulation.

 

     (v) A federal covered investment adviser.

 

     (vi) A depository institution.

 

     (vii) Any other person that is excluded by the investment

 

advisers act of 1940 from the definition of investment adviser.

 

     (viii) Any other person excluded by rule or order under this

 

act.

 

     (ix) A finder registered as a broker-dealer under this act.

 

     (f) "Investment adviser representative" means an individual

 

employed by or associated with an investment adviser or federal

 

covered investment adviser and who makes any recommendations or

 

otherwise gives investment advice regarding securities, manages

 

accounts or portfolios of clients, determines which recommendation

 

or advice regarding securities should be given, provides investment

 

advice or holds himself or herself out as providing investment

 

advice, receives compensation to solicit, offer, or negotiate for

 

the sale of or for selling investment advice, or supervises

 

employees who perform any of the foregoing. The term does not

 

include an individual who meets any of the following:

 

     (i) Performs only clerical or ministerial acts.

 

     (ii) Is an agent whose performance of investment advice is

 

solely incidental to the individual acting as an agent and does not

 

receive special compensation for investment advisory services.

 

     (iii) Is employed by or associated with a federal covered

 

investment adviser, unless the individual meets any of the

 

following:

 

     (A) Has a "place of business" in this state as that term is

 

defined by rule adopted under section 203A of the investment

 

advisers act of 1940, 15 USC 80b-3a, and is an "investment adviser

 

representative" as that term is defined by rule adopted under

 

section 203A of the investment advisers act of 1940, 15 USC 80b-3a.

 

     (B) Has a "place of business" in this state as that term is

 

defined by rule adopted under section 203A of the investment

 

advisers act of 1940, 15 USC 80b-3a, and is not a "supervised

 

person" as that term is defined in section 202(a)(25) of the

 

investment advisers act of 1940, 15 USC 80b-2.

 

     (iv) Is excluded by rule or order under this act.

 

     (g) "Issuer" means a person that issues or proposes to issue a

 

security, subject to the following:

 

     (i) The issuer of a voting trust certificate, collateral trust

 

certificate, certificate of deposit for a security, or share in an

 

investment company without a board of directors or individuals

 

performing similar functions, is the person performing the acts and

 

assuming the duties of depositor or manager pursuant to the trust

 

or other agreement or instrument under which the security is

 

issued.

 

     (ii) The issuer of an equipment trust certificate or similar

 

security serving the same purpose is the person by which the

 

property is or will be used, or to which the property or equipment

 

is or will be leased or conditionally sold, or that is otherwise

 

contractually responsible for assuring payment of the certificate.

 

     (iii) The issuer of a fractional undivided interest in an oil,

 

gas, or other mineral lease or in payments out of production under

 

a lease, right, or royalty is the owner of an interest in the lease

 

or in payments out of production under a lease, right, or royalty,

 

whether whole or fractional, that creates fractional interests for

 

the purpose of sale.

 

     Sec. 102b. As used in this act, unless the context otherwise

 

requires:

 

     (a) "Nonissuer transaction" or "nonissuer distribution" means

 

a transaction or distribution not directly or indirectly for the

 

benefit of the issuer.

 

     (b) "Offer to purchase" includes an attempt or offer to

 

obtain, or solicitation of an offer to sell, a security or interest

 

in a security for value. The term does not include a tender offer

 

that is subject to section 14(d) of title I of the securities

 

exchange act of 1934, 15 USC 78n.

 

     (c) "Person" means an individual, corporation, business trust,

 

estate, trust, partnership, limited liability company, limited

 

liability partnership, association, joint venture, or government; a

 

governmental subdivision, agency, or instrumentality; a public

 

corporation; or any other legal or commercial entity.

 

     (d) "Place of business" of a broker-dealer, an investment

 

adviser, or a federal covered investment adviser means any of the

 

following:

 

     (i) An office at which the broker-dealer, investment adviser,

 

or federal covered investment adviser regularly provides brokerage

 

or investment advice, or solicits, meets with, or otherwise

 

communicates with customers or clients.

 

     (ii) Any other location that is held out to the general public

 

as a location at which the broker-dealer, investment adviser, or

 

federal covered investment adviser provides brokerage or investment

 

advice, or solicits, meets with, or otherwise communicates with

 

customers or clients.

 

     (e) "Predecessor act" means former 1964 PA 265.

 

     (f) "Price amendment" means the amendment to a registration

 

statement filed under the securities act of 1933 or, if an

 

amendment is not filed, the prospectus or prospectus supplement

 

filed under the securities act of 1933 that includes a statement of

 

the offering price, underwriting and selling discounts or

 

commissions, amount of proceeds, conversion rates, call prices, and

 

other matters dependent upon the offering price.

 

     (g) "Principal place of business" of a broker-dealer or an

 

investment adviser means the executive office of the broker-dealer

 

or investment adviser from which the officers, partners, or

 

managers of the broker-dealer or investment adviser direct,

 

control, and coordinate the activities of the broker-dealer or

 

investment adviser.

 

     (h) "Record," except in the phrases "of record," "official

 

record," and "public record," means information that is inscribed

 

on a tangible medium or that is stored in an electronic or other

 

medium and is retrievable in perceivable form.

 

     Sec. 102c. As used in this act, unless the context otherwise

 

requires:

 

     (a) "Sale" includes every contract of sale, contract to sell,

 

or disposition of, a security or interest in a security for value,

 

and "offer to sell" includes every attempt or offer to dispose of,

 

or solicitation of an offer to purchase, a security or interest in

 

a security for value. Both terms include any of the following:

 

     (i) A security given or delivered with, or as a bonus on

 

account of, any purchase of securities or any other thing

 

constituting part of the subject of the purchase and having been

 

offered and sold for value.

 

     (ii) A gift of assessable stock involving an offer and sale.

 

     (iii) A sale or offer of a warrant or right to purchase or

 

subscribe to another security of the same or another issuer, and a

 

sale or offer of a security that gives the holder a present or

 

future right or privilege to convert the security into another

 

security of the same or another issuer, including an offer of the

 

other security.

 

     (b) "Securities and exchange commission" means the United

 

States securities and exchange commission.

 

     (c) "Security" means a note; stock; treasury stock; security

 

future; bond; debenture; evidence of indebtedness; certificate of

 

interest or participation in a profit-sharing agreement; collateral

 

trust certificate; preorganization certificate or subscription;

 

transferable share; investment contract; voting trust certificate;

 

certificate of deposit for a security; fractional undivided

 

interest in oil, gas, or other mineral rights; put, call, straddle,

 

option, or privilege on a security, certificate of deposit, or

 

group or index of securities, including an interest in or based on

 

the value of that put, call, straddle, option, or privilege on that

 

security, certificate of deposit, or group or index of securities;

 

put, call, straddle, option, or privilege entered into on a

 

national securities exchange relating to foreign currency; an

 

investment in a viatical or life settlement agreement; or, in

 

general, an interest or instrument commonly known as a "security";

 

or a certificate of interest or participation in, temporary or

 

interim certificate for, receipt for, guarantee of, or warrant or

 

right to subscribe to or purchase, any of the foregoing. All of the

 

following apply to the term security:

 

     (i) The term includes a contractual or quasi-contractual

 

arrangement that meets all of the following:

 

     (A) A person furnishes capital, other than services, to an

 

issuer under the arrangement.

 

     (B) A portion of the capital furnished under sub-subparagraph

 

(A) is subjected to the risks of the issuer's enterprise.

 

     (C) The furnishing of capital under sub-subparagraph (A) is

 

induced by representations made by an issuer, promoter, or the

 

issuer's or promoter's affiliates which give rise to a reasonable

 

understanding that a valuable tangible benefit will accrue to the

 

person furnishing the capital as a result of the operation of the

 

enterprise.

 

     (D) The person furnishing the capital under sub-subparagraph

 

(A) does not intend to be actively involved in the management of

 

the enterprise in a meaningful way.

 

     (E) At the time the capital is furnished, a promoter or its

 

affiliates anticipate that financial gain may be realized as a

 

result of the furnishing.

 

     (ii) The term includes both a certificated and an

 

uncertificated security.

 

     (iii) The term does not include an insurance or endowment policy

 

or annuity contract under which an insurance company promises to

 

pay a fixed or variable sum of money either in a lump sum or

 

periodically for life or other specified period.

 

     (iv) The term does not include an interest in a contributory or

 

noncontributory pension or welfare plan subject to the employee

 

retirement income security act of 1974.

 

     (v) The term includes an investment in a common enterprise

 

with the expectation of profits to be derived primarily from the

 

efforts of a person other than the investor. As used in this

 

subparagraph, a "common enterprise" means an enterprise in which

 

the fortunes of the investor are interwoven with those of either

 

the person offering the investment, a third party, or other

 

investors.

 

     (vi) The term may include, as an investment contract, an

 

interest in a limited partnership, a limited liability company, or

 

a limited liability partnership.

 

     (d) "Self-regulatory organization" means a national securities

 

exchange registered under the securities exchange act of 1934, a

 

national securities association of broker-dealers registered under

 

the securities exchange act of 1934, a clearing agency registered

 

under the securities exchange act of 1934, or the municipal

 

securities rule-making board established under the securities

 

exchange act of 1934.

 

     (e) "Sign" means, with present intent to authenticate or adopt

 

a record, either of the following:

 

     (i) To execute or adopt a tangible symbol.

 

     (ii) To attach or logically associate with the record an

 

electronic symbol, sound, or process.

 

     (f) "State" means a state of the United States, the District

 

of Columbia, the Commonwealth of Puerto Rico, the United States

 

Virgin Islands, or any territory or insular possession subject to

 

the jurisdiction of the United States.

 

     Sec. 103. (1) Subject to subsection (2), as used in this act:

 

     (a) "Commodity exchange act" means the commodity exchange act,

 

7 USC 1 to 27f.

 

     (b) "Electronic signatures in global and national commerce

 

act" means the electronic signatures in global and national

 

commerce act, 15 USC 7001 to 7031.

 

     (c) "Employee retirement income security act of 1974" means

 

the employee retirement income security act of 1974, 29 USC 1001 to

 

1461.

 

     (d) "Internal revenue code" means the internal revenue code of

 

1986, 26 USC 1 to 9833.

 

     (e) "Investment advisers act of 1940" means the investment

 

advisers act of 1940, 15 USC 80b-1 to 80b-21.

 

     (f) "Investment company act of 1940" means the investment

 

company act of 1940, 15 USC 80a-1 to 80a-64.

 

     (g) "National housing act" means the national housing act, 12

 

USC 1701 to 1750g.

 

     (h) "Public utility holding company act of 1935" means the

 

public utility holding company act of 1935, 15 USC 79 to 79z-6.

 

     (i) "Securities act of 1933" means the securities act of 1933,

 

15 USC 77a to 77aa.

 

     (j) "Securities exchange act of 1934" means the securities

 

exchange act of 1934, 15 USC 78a to 78nn.

 

     (k) "Securities investor protection act of 1970" means the

 

securities investor protection act of 1970, 15 USC 78aaa to 78lll.

 

     (l) "Securities litigation uniform standards act of 1998" means

 

the securities litigation uniform standards act of 1998, Public Law

 

105-353, 112 Stat. 3227.

 

     (m) "Small business investment act of 1958" means the small

 

business investment act of 1958, 15 USC 661 to 697g.

 

     (2) A reference in this act to a federal statute defined in

 

subsection (1) includes that statute and the rules and regulations

 

adopted under that statute. The administrator may, by rule or

 

order, adopt an amendment or successor to a federal statute defined

 

in subsection (1) or rules and regulations adopted under a federal

 

statute defined in subsection (1), a federal statute that is

 

similar to a federal statute defined in subsection (1), or a rule

 

or regulation that is similar to a rule or regulation adopted under

 

a federal statute defined in subsection (1).

 

     Sec. 104. Any reference in this act to an agency or department

 

of the United States is also a reference to any successor agency,

 

department, or entity of that agency or department.

 

     Sec. 105. This act modifies, limits, and supersedes the

 

electronic signatures in global and national commerce act, but does

 

not modify, limit, or supersede section 101(c) of that act, 15 USC

 

7001, or authorize electronic delivery of any of the notices

 

described in section 103(b) of that act, 15 USC 7003. This act

 

authorizes the filing of records and signatures, when specified by

 

provisions of this act or by a rule or order under this act, in a

 

manner consistent with section 104(a) of that act, 15 USC 7004.

 

ARTICLE 2

 

EXEMPTIONS FROM REGISTRATION OF SECURITIES

 

     Sec. 201. The following securities are exempt from the

 

requirements of sections 301 to 306 and 504:

 

     (a) A security, including a revenue obligation or a separate

 

security as defined in rule 131 adopted under the securities act of

 

1933, 17 CFR 230.131, issued, insured, or guaranteed by the United

 

States; by a state; by a political subdivision of a state; by a

 

public authority, agency, or instrumentality of 1 or more states;

 

by a political subdivision of 1 or more states; or by a person

 

controlled or supervised by and acting as an instrumentality of the

 

United States under authority granted by the Congress; or a

 

certificate of deposit for any of the foregoing.

 

     (b) A security issued, insured, or guaranteed by a foreign

 

government with which the United States maintains diplomatic

 

relations, or any of its political subdivisions, if the security is

 

recognized as a valid obligation by the issuer, insurer, or

 

guarantor.

 

     (c) A security issued by and representing, or that will

 

represent an interest in or a direct obligation of, or be

 

guaranteed by, any of the following:

 

     (i) An international banking institution.

 

     (ii) A banking institution organized under the laws of the

 

United States; a member bank of the federal reserve system; or a

 

depository institution a substantial portion of the business of

 

which consists or will consist of either receiving deposits or

 

share accounts that are insured to the maximum amount authorized by

 

statute by the federal deposit insurance corporation, the national

 

credit union share insurance fund, or a successor authorized by

 

federal law or exercising fiduciary powers that are similar to

 

those permitted for national banks under the authority of the

 

comptroller of currency pursuant to 12 USC 92a.

 

     (iii) Any other depository institution, unless by rule or order

 

the administrator proceeds under section 204.

 

     (d) A security issued by and representing an interest in, or a

 

debt of, or insured or guaranteed by, an insurance company

 

authorized to do business in this state.

 

     (e) A security issued or guaranteed by a railroad, other

 

common carrier, public utility, or public utility holding company

 

that is any of the following:

 

     (i) Regulated in respect to its rates and charges by the United

 

States or a state.

 

     (ii) Regulated in respect to the issuance or guarantee of the

 

security by the United States, a state, Canada, or a Canadian

 

province or territory.

 

     (iii) A public utility holding company registered under the

 

public utility holding company act of 1935 or a subsidiary of a

 

registered holding company within the meaning of that act.

 

     (f) A federal covered security specified in section 18(b)(1)

 

of the securities act of 1933, 15 USC 77r, or a security listed or

 

approved for listing on another securities market specified by rule

 

under this act; a put or a call option contract; warrant; a

 

subscription right on or with respect to those securities; or an

 

option or similar derivative security on a security or an index of

 

securities or foreign currencies issued by a clearing agency

 

registered under the securities exchange act of 1934 and listed or

 

designated for trading on a national securities exchange, a

 

facility of a national securities exchange, or a facility of a

 

national securities association registered under the securities

 

exchange act of 1934 or an offer or sale, of the underlying

 

security in connection with the offer, sale, or exercise of an

 

option or other security that was exempt when the option or other

 

security was written or issued; or an option or a derivative

 

security designated by the securities and exchange commission under

 

section 9(b) of the securities exchange act of 1934, 15 USC 78i.

 

     (g) A security issued by a person organized and operated

 

exclusively for religious, educational, benevolent, fraternal,

 

charitable, social, athletic, or reformatory purposes, or as a

 

chamber of commerce, and not for pecuniary profit, no part of the

 

net earnings of which inures to the benefit of a private

 

stockholder or other person, or a security of a company that is

 

excluded from the definition of an investment company under section

 

3(c)(10)(B) of the investment company act of 1940, 15 USC 80a-3.

 

With respect to the offer or sale of a note, bond, debenture, or

 

other evidence of indebtedness by a person described in this

 

subdivision, the administrator by rule or order may limit the

 

availability of this exemption by classifying securities, persons,

 

and transactions, imposing different requirements for different

 

classes, specifying with respect to subparagraph (ii) the scope of

 

the exemption and the grounds for denial or suspension, and

 

requiring an issuer to meet 1 or more of the following:

 

     (i) To file a notice specifying the material terms of the

 

proposed offer or sale and copies of any proposed sales and

 

advertising literature to be used and provide that the exemption

 

becomes effective if the administrator does not disallow the

 

exemption within the period established by the rule.

 

     (ii) To file a request for exemption authorization for which a

 

rule under this act may specify the scope of the exemption; the

 

requirement of an offering statement; the filing of sales and

 

advertising literature; the filing of consent to service of process

 

complying with section 611; and grounds for denial or suspension of

 

the exemption.

 

     (iii) To register under section 304.

 

     (h) A member's or owner's interest in, or a retention

 

certificate or like security given in lieu of a cash patronage

 

dividend issued by, a cooperative organized and operated as a

 

nonprofit membership cooperative under the cooperative laws of a

 

state, but not a member's or owner's interest, retention

 

certificate, or like security sold to persons other than bona fide

 

members of the cooperative.

 

     (i) An equipment trust certificate in respect to equipment

 

leased or conditionally sold to a person, if any security issued by

 

the person would be exempt under this section or would be a federal

 

covered security under section 18(b)(1) of the securities act of

 

1933, 15 USC 77r.

 

     Sec. 202. (1) The following transactions are exempt from the

 

requirements of sections 301 to 306 and 504:

 

     (a) An isolated nonissuer transaction, whether effected by or

 

through a broker-dealer or not.

 

     (b) A nonissuer transaction by or through a broker-dealer

 

registered or exempt from registration under this act, and a resale

 

transaction by a sponsor of a unit investment trust registered

 

under the investment company act of 1940, in a security of a class

 

that has been outstanding in the hands of the public for at least

 

90 days, if all of the following are met at the date of the

 

transaction:

 

     (i) The issuer of the security is engaged in business, the

 

issuer is not in the organizational stage or in bankruptcy or

 

receivership, and the issuer is not a blank check, blind pool, or

 

shell company that has no specific business plan or purpose or has

 

indicated that its primary business plan is to engage in a merger

 

or combination of the business with, or an acquisition of, an

 

unidentified person.

 

     (ii) The security is sold at a price reasonably related to its

 

current market price.

 

     (iii) The security does not constitute the whole or part of an

 

unsold allotment to, or a subscription or participation by, the

 

broker-dealer as an underwriter of the security or a

 

redistribution.

 

     (iv) A nationally recognized securities manual or its

 

electronic equivalent designated by rule or order under this act or

 

a record filed with the securities and exchange commission that is

 

publicly available contains all of the following:

 

     (A) A description of the business and operations of the

 

issuer.

 

     (B) The names of the issuer's executive officers and the names

 

of the issuer's directors, if any.

 

     (C) An audited balance sheet of the issuer as of a date within

 

18 months before the date of the transaction or, in the case of a

 

reorganization or merger, and when the parties to the

 

reorganization or merger each had an audited balance sheet, a pro

 

forma balance sheet for the combined entity.

 

     (D) An audited income statement for each of the issuer's 2

 

immediately previous fiscal years or for the period of existence of

 

the issuer, whichever is shorter, or, in the case of a

 

reorganization or merger when each party to the reorganization or

 

merger had audited income statements, a pro forma income statement.

 

     (v) Any of the following requirements are met:

 

     (A) The issuer of the security has a class of equity

 

securities listed on a national securities exchange registered

 

under section 6 of the securities exchange act of 1934, 15 USC 78f,

 

or designated for trading on the national association of securities

 

dealers automated quotation system.

 

     (B) The issuer of the security is a unit investment trust

 

registered under the investment company act of 1940.

 

     (C) The issuer of the security, including its predecessors,

 

has been engaged in continuous business for at least 3 years.

 

     (D) The issuer of the security has total assets of at least

 

$2,000,000.00 based on an audited balance sheet as of a date within

 

18 months before the date of the transaction or, in the case of a

 

reorganization or merger when the parties to the reorganization or

 

merger each had an audited balance sheet as of a date within 18

 

months before the date of the transaction, a pro forma balance

 

sheet for the combined entity.

 

     (c) A nonissuer transaction by or through a broker-dealer

 

registered or exempt from registration under this act in a security

 

of a foreign issuer that is a margin security defined in

 

regulations or rules adopted by the board of governors of the

 

federal reserve system.

 

     (d) A nonissuer transaction by or through a broker-dealer

 

registered or exempt from registration under this act in an

 

outstanding security if the guarantor of the security files reports

 

with the securities and exchange commission under the reporting

 

requirements of section 13 or 15(d) of the securities exchange act

 

of 1934, 15 USC 78m or 78o.

 

     (e) A nonissuer transaction by or through a broker-dealer

 

registered or exempt from registration under this act in a security

 

that meets 1 or more of the following:

 

     (i) Is rated at the time of the transaction by a nationally

 

recognized statistical rating organization in 1 of its 4 highest

 

rating categories.

 

     (ii) Has a fixed maturity or a fixed interest or dividend, if

 

both of the following are met:

 

     (A) A default has not occurred during the current fiscal year

 

or within the 3 previous fiscal years or during the existence of

 

the issuer and any predecessor if less than 3 fiscal years, in the

 

payment of principal, interest, or dividends on the security.

 

     (B) The issuer is engaged in business, is not in the

 

organizational stage or in bankruptcy or receivership, and is not

 

and has not been within the previous 12 months a blank check, blind

 

pool, or shell company that has no specific business plan or

 

purpose or has indicated that its primary business plan is to

 

engage in a merger or combination of the business with, or an

 

acquisition of, an unidentified person.

 

     (f) A nonissuer transaction by or through a broker-dealer

 

registered or exempt from registration under this act effecting an

 

unsolicited order or offer to purchase.

 

     (g) A nonissuer transaction executed by a bona fide pledgee

 

without any purpose of evading this act.

 

     (h) A nonissuer transaction by a federal covered investment

 

adviser with investments under management in excess of

 

$100,000,000.00 acting in the exercise of discretionary authority

 

in a signed record for the account of others.

 

     (i) A transaction in a security, whether or not the security

 

or transaction is otherwise exempt, in exchange for 1 or more bona

 

fide outstanding securities, claims, or property interests, or

 

partly in exchange and partly for cash, if the terms and conditions

 

of the issuance and exchange or the delivery and exchange and the

 

fairness of the terms and conditions have been approved by the

 

administrator at a hearing.

 

     (j) A transaction between the issuer or other person on whose

 

behalf the offering is made and an underwriter, or among

 

underwriters.

 

     (k) A transaction in a note, bond, debenture, or other

 

evidence of indebtedness secured by a mortgage or other security

 

agreement if all of the following are met:

 

     (i) The note, bond, debenture, or other evidence of

 

indebtedness is offered and sold with the mortgage or other

 

security agreement as a unit.

 

     (ii) A general solicitation or general advertisement of the

 

transaction is not made.

 

     (iii) A commission or other remuneration is not paid or given,

 

directly or indirectly, to a person not registered under this act

 

as a broker-dealer or as an agent.

 

     (l) A transaction by an executor, administrator of an estate,

 

sheriff, marshal, receiver, trustee in bankruptcy, guardian, or

 

conservator.

 

     (m) A sale or offer to sell to any of the following:

 

     (i) An institutional investor.

 

     (ii) A federal covered investment adviser.

 

     (iii) Any other person exempted by rule or order under this act.

 

     (n) A sale or an offer to sell securities by or on behalf of

 

an issuer, if the transaction is part of a single issue in which

 

all of the following are met:

 

     (i) There are not more than 25 purchasers in this state during

 

any 12 consecutive months, other than those designated in

 

subdivision (m).

 

     (ii) There is no general solicitation or general advertising

 

used in connection with the offer to sell or sale of the

 

securities.

 

     (iii) A commission or other remuneration is not paid or given,

 

directly or indirectly, to a person other than a broker-dealer

 

registered under this act or an agent registered under this act for

 

soliciting a prospective purchaser in this state.

 

     (iv) The issuer reasonably believes that all the purchasers in

 

this state other than those designated in subdivision (m) are

 

purchasing for investment.

 

     (o) A transaction under an offer to existing security holders

 

of the issuer, including persons that at the date of the

 

transaction are holders of convertible securities, options, or

 

warrants, if a commission or other remuneration, other than a

 

standby commission, is not paid or given, directly or indirectly,

 

for soliciting a security holder in this state.

 

     (p) An offer to sell, but not a sale, of a security not exempt

 

from registration under the securities act of 1933 if both of the

 

following are met:

 

     (i) A registration or offering statement or similar record as

 

required under the securities act of 1933 has been filed, but is

 

not effective, or the offer is made in compliance with rule 165

 

adopted under the securities act of 1933, 17 CFR 230.165.

 

     (ii) A stop order of which the offeror is aware has not been

 

issued against the offeror by the administrator or the securities

 

and exchange commission, and an audit, inspection, or proceeding

 

that is public and may culminate in a stop order is not known by

 

the offeror to be pending.

 

     (q) An offer to sell, but not a sale, of a security exempt

 

from registration under the securities act of 1933 if all of the

 

following are met:

 

     (i) A registration statement has been filed under this act, but

 

is not effective.

 

     (ii) A solicitation of interest is provided in a record to

 

offerees in compliance with a rule adopted by the administrator

 

under this act.

 

     (iii) A stop order of which the offeror is aware has not been

 

issued by the administrator under this act, and an audit,

 

inspection, or proceeding that may culminate in a stop order is not

 

known by the offeror to be pending.

 

     (r) A transaction involving the distribution of the securities

 

of an issuer to the security holders of another person in

 

connection with a merger, consolidation, exchange of securities,

 

sale of assets, or other reorganization to which the issuer, or its

 

parent or subsidiary, and the other person, or its parent or

 

subsidiary, are parties.

 

     (s) A rescission offer, sale, or purchase under section 510.

 

     (t) An offer or sale of a security to a person not resident in

 

this state and not present in this state if the offer or sale does

 

not constitute a violation of the laws of the state or foreign

 

jurisdiction in which the offeree or purchaser is present and is

 

not part of an unlawful plan or scheme to evade this act.

 

     (u) An offer or sale of a security pursuant to an employee's

 

stock purchase, savings, option, profit-sharing, pension, or

 

similar employees' benefit plan, including any securities, plan

 

interests, and guarantees issued under a compensatory benefit plan

 

or compensation contract, contained in a record, established by the

 

issuer, its parents, its majority-owned subsidiaries, or the

 

majority-owned subsidiaries of the issuer's parent for the

 

participation of their employees including any of the following:

 

     (i) Offers or sales of those securities to directors; general

 

partners; trustees, if the issuer is a business trust; officers; or

 

consultants and advisors.

 

     (ii) Family members who acquire those securities from those

 

persons through gifts or domestic relations orders.

 

     (iii) Former employees, directors, general partners, trustees,

 

officers, consultants, and advisors if those individuals were

 

employed by or providing services to the issuer when the securities

 

were offered.

 

     (iv) Insurance agents who are exclusive insurance agents of the

 

issuer, its subsidiaries or parents, or who derive more than 50% of

 

their annual income from those organizations.

 

     (v) A transaction involving any of the following:

 

     (i) A stock dividend or equivalent equity distribution, whether

 

the corporation or other business organization distributing the

 

dividend or equivalent equity distribution is the issuer or not, if

 

nothing of value is given by stockholders or other equity holders

 

for the dividend or equivalent equity distribution other than the

 

surrender of a right to a cash or property dividend if each

 

stockholder or other equity holder may elect to take the dividend

 

or equivalent equity distribution in cash, property, or stock.

 

     (ii) An act incident to a judicially approved reorganization in

 

which a security is issued in exchange for 1 or more outstanding

 

securities, claims, or property interests, or partly in exchange

 

and partly for cash.

 

     (iii) The solicitation of tenders of securities by an offeror in

 

a tender offer in compliance with rule 162 adopted under the

 

securities act of 1933, 17 CFR 230.162.

 

     (w) Subject to subsection (2), a nonissuer transaction in an

 

outstanding security by or through a broker-dealer registered or

 

exempt from registration under this act, if both of the following

 

are met:

 

     (i) The issuer is a reporting issuer in a foreign jurisdiction

 

designated in subsection (2)(a), or by rule or order of the

 

administrator, and has been subject to continuous reporting

 

requirements in the foreign jurisdiction for not less than 180 days

 

before the transaction.

 

     (ii) The security is listed on the foreign jurisdiction's

 

securities exchange that has been designated in subsection (2)(a),

 

or by rule or order under this act, or is a security of the same

 

issuer that is of senior or substantially equal rank to the listed

 

security or is a warrant or right to purchase or subscribe to any

 

of the foregoing.

 

     (2) For purposes of subsection (1)(w), both of the following

 

apply:

 

     (a) Canada, together with its provinces and territories, is a

 

designated foreign jurisdiction and the Toronto stock exchange,

 

inc., is a designated securities exchange.

 

     (b) After an administrative hearing in compliance with

 

applicable state law, the administrator, by rule or order under

 

this act, may revoke the designation of a securities exchange under

 

subsection (1)(w) or this subsection if the administrator finds

 

that revocation is necessary or appropriate in the public interest

 

and for the protection of investors.

 

     Sec. 203. A rule or order under this act may exempt a

 

security, transaction, or offer, or a rule or order under this act

 

may exempt a class of securities, transactions, or offers, from any

 

or all of the requirements of sections 301 to 306 and 504, and a

 

rule or order under this act may waive any or all of the conditions

 

for an exemption or offers under sections 201 and 202.

 

     Sec. 204. (1) Except with respect to a federal covered

 

security or a transaction involving a federal covered security, an

 

order of the administrator under this act may deny or suspend

 

application of, condition, limit, or revoke an exemption created

 

under section 201(c)(iii), (g), or (h) or 202 or an exemption or

 

waiver created under section 203 with respect to a specific

 

security, transaction, or offer. An order under this section may

 

only be issued pursuant to the procedures in section 306(4) or 604.

 

     (2) A person does not violate section 301, 303 to 306, 504, or

 

510 by an offer to sell, an offer to purchase, a sale, or a

 

purchase effected after the entry of an order issued under this

 

section if the person did not know, and in the exercise of

 

reasonable care could not have known, of the order.

 

ARTICLE 3

 

REGISTRATION OF SECURITIES AND NOTICE FILINGS OF FEDERAL COVERED

 

SECURITIES

 

     Sec. 301. A person shall not offer or sell a security in this

 

state unless 1 or more of the following are met:

 

     (a) The security is a federal covered security.

 

     (b) The security, transaction, or offer is exempted from

 

registration under sections 201 to 203.

 

     (c) The security is registered under this act.

 

     Sec. 302. (1) A rule or order under this act may require the

 

filing of 1 or more of the following records with respect to a

 

security issued by an investment company that is a federal covered

 

security as defined in section 18(b)(2) of the securities act of

 

1933, 15 USC 77r, that is not otherwise exempt under sections 201

 

to 203:

 

     (a) Before the initial offer of a federal covered security in

 

this state, all records that are part of a federal registration

 

statement filed with the securities and exchange commission under

 

the securities act of 1933, a consent to service of process signed

 

by the issuer, and a fee of $500.00.

 

     (b) After the initial offer of the federal covered security in

 

this state, all records that are part of an amendment to a federal

 

registration statement filed with the securities and exchange

 

commission under the securities act of 1933.

 

     (2) Any security issued by a unit investment trust that is

 

registered or that has filed a registration statement under the

 

investment company act of 1940 as an investment company may be

 

offered for sale and sold into, from, or within this state for an

 

indefinite period commencing upon the later of the trust's

 

effectiveness with the securities and exchange commission or the

 

administrator's receipt of a notice as prescribed by the

 

administrator and a 1-time notice filing fee of $500.00.

 

     (3) Each of the following applies to a notice filing under

 

subsection (1):

 

     (a) A notice filing is effective for a period of 1 year,

 

commencing upon the later of the effectiveness of the offering with

 

the securities and exchange commission or the administrator's

 

receipt of the notice filing.

 

     (b) A notice filing may be renewed for an additional 1-year

 

period by filing a current form NF and the fee required by

 

subsection (8) before the expiration of the 1-year effective

 

period. The renewal is effective upon the expiration of the prior

 

notice period.

 

     (c) A notice filing may be terminated by filing with the

 

administrator a notice of termination as prescribed by the

 

administrator. The termination is effective upon the

 

administrator's receipt of the notice of termination.

 

     (4) With respect to any security that is a federal covered

 

security under section 18(b)(4)(D) of the securities act of 1933,

 

15 USC 77r, the issuer shall file all of the following:

 

     (a) A notice on securities and exchange commission form D or a

 

form approved by the administrator.

 

     (b) A consent to service of process signed by the issuer, no

 

later than 15 days after the first sale of a federal covered

 

security in this state.

 

     (c) A nonrefundable filing fee of $100.00.

 

     (5) The administrator, by rule or order, may require the

 

filing of any document filed with the securities and exchange

 

commission under the securities act of 1933 and a nonrefundable

 

filing fee of $100.00 with respect to any federal covered security.

 

     (6) The administrator may issue a stop order suspending the

 

offer and sale of a federal covered security, except a federal

 

covered security under section 18(b)(1) of the securities act of

 

1933, 15 USC 77r, if it finds that the order is in the public

 

interest and there is a failure to comply with this section.

 

     (7) The administrator may waive any or all of the provisions

 

of this section by rule or order.

 

     (8) All of the following apply to the renewals of a notice

 

filing under subsection (3):

 

     (a) Subject to adjustment under subdivision (c), the fee for

 

the renewal is 1 of the following:

 

     (i) If the issuer projects nonexempt sales of the security in

 

this state during the 1-year renewal period of $250,000.00 or less,

 

$100.00.

 

     (ii) If the issuer projects nonexempt sales of the security in

 

this state during the 1-year renewal period of more than

 

$250,000.00 but not more than $700,000.00, $400.00.

 

     (iii) If the issuer projects nonexempt sales of the security in

 

this state during the 1-year renewal period of more than

 

$700,000.00 but not more than $1,000,000.00, $800.00.

 

     (iv) If the issuer projects nonexempt sales of the security in

 

this state during the 1-year renewal period of more than

 

$1,000,000.00, $1,400.00.

 

     (b) For purposes of subdivision (a), an issuer's projection of

 

nonexempt sales of a security must be reasonable and based on any

 

facts known to the issuer at the time of renewal that may affect

 

sales of the security, including, but not limited to, nonexempt

 

sales of the security in this state during the current 1-year

 

notice filing period.

 

     (c) If an issuer's nonexempt sales of a security in this state

 

during a 1-year notice filing period exceed the projections for

 

that period that the issuer had submitted to the administrator for

 

determination of the issuer's renewal fee for that 1-year notice

 

filing period, the issuer is not required to amend its projections

 

or pay an additional fee for that notice filing period. However,

 

the fee for renewal of the notice filing shall be the greater of

 

the following:

 

     (i) The renewal fee determined under subdivision (a).

 

     (ii) A renewal fee determined under subdivision (a), using

 

actual sales during the current notice filing period as the

 

projected sales for the renewal notice filing period.

 

     (d) If an issuer's nonexempt sales of a security in this state

 

during a 1-year notice filing period are less than the projections

 

for that period that the issuer had submitted to the administrator

 

for determination of the issuer's renewal fee for the 1-year notice

 

filing period, the issuer is not entitled to a refund of any part

 

of the renewal fee for that period or adjustment of the renewal fee

 

for any renewal period.

 

     (e) Upon written request of the administrator, an issuer shall

 

provide sales reports showing the issuer's nonexempt sales of a

 

security in this state for the current and 2 previous 1-year notice

 

filing periods, but the issuer is not otherwise required to provide

 

a sales report to the administrator in connection with a renewal of

 

a notice filing.

 

     (f) If the administrator determines that for 2 consecutive 1-

 

year notice filing periods an issuer's nonexempt sales of a

 

security in this state exceeded the issuer's sales projections for

 

that period, the administrator may assess the issuer an

 

administrative fine in the amount of the renewal fees the issuer

 

would have paid under subdivision (a) if its projections had been

 

accurate. This administrative fine is in addition to an increased

 

fee for renewal under subdivision (c), if any.

 

     (9) If the administrator finds that there is a failure to

 

comply with a notice or fee requirement of this section, the

 

administrator may issue a stop order suspending the offer and sale

 

of a federal covered security in this state, except a federal

 

covered security under section 18(b)(1) of the securities act of

 

1933, 15 USC 77r. If the deficiency is corrected, the stop order is

 

void as of the time of its issuance and no other charge or

 

administrative or civil fine may be imposed by the administrator.

 

     Sec. 303. (1) A security for which a registration statement

 

has been filed under the securities act of 1933 in connection with

 

the same offering may be registered by coordination under this

 

section.

 

     (2) A registration statement and accompanying records under

 

this section must contain or be accompanied by all of the following

 

records in addition to the information specified in section 305 and

 

a consent to service of process complying with section 611:

 

     (a) A copy of the latest form of prospectus filed under the

 

securities act of 1933.

 

     (b) A copy of the articles of incorporation and bylaws or

 

their substantial equivalents currently in effect, a copy of any

 

agreement with or among underwriters, a copy of any indenture or

 

other instrument governing the issuance of the security to be

 

registered, and a specimen, copy, or description of the security

 

that is required by rule or order under this act.

 

     (c) Copies of any other information, or any other records,

 

filed by the issuer under the securities act of 1933 requested by

 

the administrator.

 

     (d) An undertaking to forward each amendment to the federal

 

prospectus, other than an amendment that delays the effective date

 

of the registration statement, promptly after it is filed with the

 

securities and exchange commission.

 

     (3) A registration statement under this section becomes

 

effective simultaneously with or subsequent to the federal

 

registration statement when all the following conditions are

 

satisfied:

 

     (a) A stop order under subsection (4) or section 306 or issued

 

by the securities and exchange commission is not in effect and a

 

proceeding is not pending against the issuer under section 306.

 

     (b) The registration statement has been on file for at least

 

20 days or a shorter period provided by rule or order under this

 

act.

 

     (c) The registrant has not consented to a later effective

 

date.

 

     (4) The registrant shall promptly notify the administrator in

 

a record of the date when the federal registration statement

 

becomes effective and the content of a price amendment, if any, and

 

shall promptly file a record containing the price amendment. If the

 

notice is not timely received, the administrator may issue a stop

 

order, without prior notice or hearing, retroactively denying

 

effectiveness to the registration statement or suspending its

 

effectiveness until compliance with this section. The administrator

 

shall promptly notify the registrant of an order by telegram,

 

telephone, or electronic means and promptly confirm this notice by

 

a record. If the registrant subsequently complies with the notice

 

requirements of this section, the stop order is void as of the date

 

of its issuance.

 

     (5) If the federal registration statement becomes effective

 

before each of the conditions in this section is satisfied or is

 

waived by the administrator, the registration statement is

 

automatically effective under this act when all the conditions are

 

satisfied or waived. If the registrant notifies the administrator

 

of the date when the federal registration statement is expected to

 

become effective, the administrator shall promptly notify the

 

registrant by telegram, telephone, or electronic means and promptly

 

confirm this notice by a record, indicating whether all the

 

conditions are satisfied or waived and whether the administrator

 

intends the institution of a proceeding under section 306. The

 

notice by the administrator does not preclude the institution of a

 

proceeding under section 306.

 

     Sec. 304. (1) A security may be registered by qualification

 

under this section.

 

     (2) A registration statement under this section must contain

 

the information or records specified in section 305, a consent to

 

service of process complying with section 611, and, if provided by

 

rule under this act, all of the following information or records:

 

     (a) With respect to the issuer and any significant subsidiary,

 

its name, address, and form of organization, the state or foreign

 

jurisdiction and date of its organization, the general character

 

and location of its business, a description of its physical

 

properties and equipment, and a statement of the general

 

competitive conditions in the industry or business in which it is

 

or will be engaged.

 

     (b) With respect to each director and officer of the issuer,

 

and other person having a similar status or performing similar

 

functions, the person's name, address, and principal occupation for

 

the previous 5 years, the amount of securities of the issuer held

 

by the person as of the thirtieth day before the filing of the

 

registration statement, the amount of the securities covered by the

 

registration statement to which the person has indicated an

 

intention to subscribe, and a description of any material interest

 

of the person in any material transaction with the issuer or a

 

significant subsidiary effected within the previous 3 years or

 

proposed to be effected.

 

     (c) With respect to persons covered by subdivision (b), the

 

aggregate sum of the remuneration paid to those persons during the

 

previous 12 months and estimated to be paid during the next 12

 

months, directly or indirectly, by the issuer, and all

 

predecessors, parents, subsidiaries, and affiliates of the issuer.

 

     (d) With respect to a person owning of record or owning

 

beneficially, if known, 10% or more of the outstanding shares of

 

any class of equity security of the issuer, the information

 

specified in subdivision (b) other than the person's occupation.

 

     (e) With respect to a promoter if the issuer was organized

 

within the previous 3 years, the information or records specified

 

in subdivision (b), any amount paid to the promoter within that

 

period or intended to be paid to the promoter, and the

 

consideration for the payment.

 

     (f) With respect to a person on whose behalf any part of the

 

offering is to be made in a nonissuer distribution, the person's

 

name and address, the amount of securities of the issuer held by

 

the person as of the date of the filing of the registration

 

statement, a description of any material interest of the person in

 

any material transaction with the issuer or any significant

 

subsidiary effected within the previous 3 years or proposed to be

 

effected, and a statement of the reasons for making the offering.

 

     (g) The capitalization and long-term debt, on both a current

 

and pro forma basis, of the issuer and any significant subsidiary,

 

including a description of each security outstanding or being

 

registered or otherwise offered, and a statement of the amount and

 

kind of consideration, whether in the form of cash, physical

 

assets, services, patents, goodwill, or anything else of value, for

 

which the issuer or any subsidiary has issued its securities within

 

the previous 2 years or is obligated to issue its securities.

 

     (h) The kind and amount of securities to be offered, the

 

proposed offering price or the method by which it is to be

 

computed, any variation at which a proportion of the offering is to

 

be made to a person or class of persons other than the

 

underwriters, with a specification of the person or class, the

 

basis upon which the offering is to be made if otherwise than for

 

cash, the estimated aggregate underwriting and selling discounts or

 

commissions and finders' fees, including separately cash,

 

securities, contracts, or anything else of value to accrue to the

 

underwriters or finders in connection with the offering, or, if the

 

selling discounts or commissions are variable, the basis of

 

determining them and their maximum and minimum amounts, the

 

estimated amounts of other selling expenses, including legal,

 

engineering, and accounting charges, the name and address of each

 

underwriter and each recipient of a finder's fee, a copy of any

 

underwriting or selling group agreement under which the

 

distribution is to be made, or the proposed form of any such

 

agreement whose terms have not yet been determined, and a

 

description of the plan of distribution of any securities that are

 

to be offered otherwise than through an underwriter.

 

     (i) The estimated monetary proceeds to be received by the

 

issuer from the offering, the purposes for which the proceeds are

 

to be used by the issuer, the estimated amount to be used for each

 

purpose, the order or priority in which the proceeds will be used

 

for the purposes stated, the amounts of any funds to be raised from

 

other sources to achieve the purposes stated, the sources of the

 

funds, and, if a part of the proceeds is to be used to acquire

 

property, including goodwill, otherwise than in the ordinary course

 

of business, the names and addresses of the vendors, the purchase

 

price, the names of any persons that have received commissions in

 

connection with the acquisition, and the amounts of the commissions

 

and other expenses in connection with the acquisition, including

 

the cost of borrowing money to finance the acquisition.

 

     (j) A description of any stock options or other security

 

options outstanding, or to be created in connection with the

 

offering, and the amount of those options held or to be held by

 

each person required to be named in subdivision (b), (d), (e), (f),

 

or (h) and by any person that holds or will hold 10% or more in the

 

aggregate of those options.

 

     (k) The dates of, parties to, and general effect concisely

 

stated of each managerial or other material contract made or to be

 

made otherwise than in the ordinary course of business to be

 

performed in whole or in part at or after the filing of the

 

registration statement or that was made within the previous 2

 

years, and a copy of the contract.

 

     (l) A description of any pending litigation, action, or

 

proceeding to which the issuer is a party and that materially

 

affects its business or assets, including any litigation, action,

 

or proceeding known to be contemplated by governmental authorities.

 

     (m) A copy of any prospectus, pamphlet, circular, form letter,

 

advertisement, or other sales literature intended as of the

 

effective date to be used in connection with the offering and any

 

solicitation of interest used in compliance with section 202(q)(ii).

 

     (n) A specimen or copy of the security being registered,

 

unless the security is uncertificated, a copy of the issuer's

 

articles of incorporation and bylaws, or their substantial

 

equivalents, in effect, and a copy of any indenture or other

 

instrument covering the security to be registered.

 

     (o) A signed or conformed copy of an opinion of counsel

 

concerning the legality of the security being registered, with an

 

English translation if it is in a language other than English,

 

which states whether the security when sold will be validly issued,

 

fully paid, and nonassessable and, if a debt security, a binding

 

obligation of the issuer.

 

     (p) A signed or conformed copy of a consent of any accountant,

 

engineer, appraiser, or other person whose profession gives

 

authority for a statement made by the person, if the person is

 

named as having prepared or certified a report or valuation, other

 

than an official record, that is public, which is used in

 

connection with the registration statement.

 

     (q) A balance sheet of the issuer as of a date within 4 months

 

before the filing of the registration statement, a statement of

 

income and a statement of cash flows for each of the 3 fiscal years

 

preceding the date of the balance sheet and for any period between

 

the close of the immediately previous fiscal year and the date of

 

the balance sheet, or for the period of the issuer's and any

 

predecessor's existence if less than 3 years, and, if any part of

 

the proceeds of the offering is to be applied to the purchase of a

 

business, the financial statements that would be required if that

 

business were the registrant.

 

     (r) Any additional information or records required by rule or

 

order under this act.

 

     (3) A registration statement under this section becomes

 

effective 30 days, or any shorter period provided by rule or order

 

under this act, after the date the registration statement or the

 

last amendment other than a price amendment is filed, if any of the

 

following apply:

 

     (a) A stop order is not in effect and a proceeding is not

 

pending under section 306.

 

     (b) The administrator has not issued an order under section

 

306 delaying effectiveness.

 

     (c) The applicant or registrant has not requested that

 

effectiveness be delayed.

 

     (4) The administrator may delay effectiveness once for not

 

more than 90 days if the administrator determines the registration

 

statement is not complete in all material respects and promptly

 

notifies the applicant or registrant of that determination. The

 

administrator may also delay effectiveness for a further period of

 

not more than 30 days if the administrator determines that the

 

delay is necessary or appropriate.

 

     (5) A rule or order under this act may require as a condition

 

of registration under this section that a prospectus containing a

 

specified part of the information or record specified in subsection

 

(2) be sent or given to each person to which an offer is made,

 

before or concurrently with the earliest of any of the following:

 

     (a) The first offer made in a record to the person otherwise

 

than by means of a public advertisement, by or for the account of

 

the issuer or another person on whose behalf the offering is being

 

made, or by an underwriter or broker-dealer that is offering part

 

of an unsold allotment or subscription taken by the person as a

 

participant in the distribution.

 

     (b) The confirmation of a sale made by or for the account of

 

the person.

 

     (c) Payment pursuant to the sale.

 

     (d) Delivery of the security pursuant to the sale.

 

     Sec. 305. (1) A registration statement may be filed by the

 

issuer, a person on whose behalf the offering is to be made, or a

 

broker-dealer registered under this act.

 

     (2) A person filing a registration statement shall pay a

 

filing fee of 1/10 of 1% of the maximum aggregate offering price at

 

which the registered securities are to be offered in this state,

 

but the fee shall in no case be less than $100.00 or more than

 

$1,250.00. If an application for registration is withdrawn before

 

the effective date or a preeffective stop order is issued under

 

section 306, the administrator shall retain a fee of $100.00 if the

 

initial review has not been commenced, and the full filing fee

 

after review has been commenced.

 

     (3) A registration statement filed under section 303 or 304

 

must specify all of the following:

 

     (a) The amount of securities to be offered in this state.

 

     (b) The states in which a registration statement or similar

 

record in connection with the offering has been or is to be filed.

 

     (c) Any adverse order, judgment, or decree issued in

 

connection with the offering by a state securities regulator, the

 

securities and exchange commission, or a court.

 

     (4) A record filed under this act or the predecessor act,

 

within 5 years preceding the filing of a registration statement,

 

may be incorporated by reference in the registration statement to

 

the extent that the record is currently accurate.

 

     (5) In the case of a nonissuer distribution, information or a

 

record shall not be required under subsection (9) or section 304,

 

unless it is known to the person filing the registration statement

 

or to the person on whose behalf the distribution is to be made, or

 

unless it can be furnished by those persons without unreasonable

 

effort or expense.

 

     (6) A rule or order under this act may require as a condition

 

of registration that a security issued within the previous 5 years,

 

or to be issued to a promoter for a consideration substantially

 

less than the public offering price or to a person for a

 

consideration other than cash, be deposited in escrow and that the

 

proceeds from the sale of the registered security in this state be

 

impounded until the issuer receives a specified amount from the

 

sale of the security either in this state or elsewhere. The

 

conditions of any escrow or impoundment required under this

 

subsection may be established by rule or order under this act, but

 

the administrator shall not reject a depository institution solely

 

because of its location in another state.

 

     (7) A rule or order under this act may require as a condition

 

of registration that a security registered under this act be sold

 

only on a specified form of subscription or sale contract and that

 

a signed or conformed copy of each contract be filed under this act

 

or preserved for a period specified by the rule or order, which may

 

not be longer than 5 years.

 

     (8) Except while a stop order is in effect under section 306,

 

a registration statement is effective for 1 year after its

 

effective date, or for a longer period designated in an order under

 

this act during which the security is being offered or distributed

 

in a nonexempted transaction by or for the account of the issuer or

 

other person on whose behalf the offering is being made or by an

 

underwriter or broker-dealer that is still offering part of an

 

unsold allotment or subscription taken as a participant in the

 

distribution. For the purposes of a nonissuer transaction, all

 

outstanding securities of the same class identified in the

 

registration statement as a security registered under this act are

 

considered to be registered while the registration statement is

 

effective. If any securities of the same class are outstanding, a

 

registration statement may not be withdrawn until 1 year after its

 

effective date. A registration statement may be withdrawn only with

 

the approval of the administrator.

 

     (9) While a registration statement is effective, a rule or

 

order under this act may require the person that filed the

 

registration statement to file reports, not more often than

 

quarterly, to keep the information or other record in the

 

registration statement reasonably current and to disclose the

 

progress of the offering.

 

     (10) A registration statement may be amended after its

 

effective date. The posteffective amendment becomes effective when

 

the administrator so orders. If a posteffective amendment is made

 

to increase the number of securities specified to be offered or

 

sold, the person filing the amendment shall pay a registration fee

 

calculated in the manner specified in subsection (2). A

 

posteffective amendment relates back to the date of the offering of

 

the additional securities being registered if the amendment is

 

filed and the additional registration fee is paid within 1 year

 

after the date of the sale.

 

     Sec. 306. (1) The administrator may issue a stop order denying

 

effectiveness to, or suspending or revoking the effectiveness of, a

 

registration statement if the administrator finds that the order is

 

in the public interest and that 1 or more of the following apply:

 

     (a) The registration statement as of its effective date or

 

before the effective date in the case of an order denying

 

effectiveness, an amendment under section 305(10) as of its

 

effective date, or a report under section 305(9) is incomplete in a

 

material respect or contains a statement that, in the light of the

 

circumstances under which it was made, was false or misleading with

 

respect to a material fact.

 

     (b) This act or a rule adopted or order issued under this act

 

or a condition imposed under this act has been willfully violated,

 

in connection with the offering, by the person filing the

 

registration statement; by the issuer, a partner, officer, or

 

director of the issuer or a person having a similar status or

 

performing a similar function; a promoter of the issuer or a person

 

directly or indirectly controlling or controlled by the issuer; but

 

only if the person filing the registration statement is directly or

 

indirectly controlled by or acting for the issuer; or by an

 

underwriter.

 

     (c) The security registered or sought to be registered is the

 

subject of a permanent or temporary injunction of a court of

 

competent jurisdiction or an administrative stop order or similar

 

order issued under any federal, foreign, or state law other than

 

this act applicable to the offering, but the administrator shall

 

not institute a proceeding against an effective registration

 

statement under this paragraph more than 1 year after the date of

 

the order or injunction on which it is based, and the administrator

 

shall not issue an order under this subdivision on the basis of an

 

order or injunction issued under the securities act of another

 

state unless the order or injunction was based on conduct that

 

would constitute, as of the date of the order, a ground for a stop

 

order under this section.

 

     (d) The issuer's enterprise or method of business includes or

 

would include activities that are unlawful where performed.

 

     (e) With respect to a security sought to be registered under

 

section 303, there has been a failure to comply with the

 

undertaking required by section 303(2)(d).

 

     (f) The applicant or registrant has not paid the proper filing

 

fee, but the administrator shall void the order if the deficiency

 

is corrected.

 

     (g) One or more of the following apply to the offering:

 

     (i) The offering will work or tend to work a fraud upon

 

purchasers or would so operate.

 

     (ii) The offering has been or would be made with unreasonable

 

amounts of underwriters' and sellers' discounts, commissions, or

 

other compensation, promoters' profits or participations, or

 

unreasonable amounts or kinds of options.

 

     (iii) The offering is being made on terms that are unfair,

 

unjust, or inequitable.

 

     (2) To the extent practicable, the administrator by rule or

 

order under this act shall publish guidelines, rules, or orders

 

that provide notice of conduct that violates subsection (1)(g).

 

     (3) The administrator shall not institute a stop order

 

proceeding against an effective registration statement on the basis

 

of conduct or a transaction known to the administrator when the

 

registration statement became effective unless the proceeding is

 

instituted within 30 days after the registration statement became

 

effective.

 

     (4) The administrator may summarily revoke, deny, postpone, or

 

suspend the effectiveness of a registration statement pending final

 

determination of an administrative proceeding. Upon the issuance of

 

the order, the administrator shall promptly notify each person

 

specified in subsection (5) that the order has been issued, the

 

reasons for the revocation, denial, postponement, or suspension,

 

and that within 15 days after the receipt of a request in a record

 

from the person the matter will be scheduled for a hearing. If a

 

hearing is not requested and none is ordered by the administrator,

 

within 30 days after the date of service of the order, the order

 

becomes final. If a hearing is requested or ordered, the

 

administrator, after notice of and opportunity for hearing for each

 

person subject to the order, may modify or vacate the order or

 

extend the order until final determination.

 

     (5) The administrator shall not issue a stop order under this

 

section until all of the following have occurred:

 

     (a) Appropriate notice has been given to the applicant or

 

registrant, the issuer, and the person on whose behalf the

 

securities are to be or have been offered.

 

     (b) An opportunity for hearing has been given to the applicant

 

or registrant, the issuer, and the person on whose behalf the

 

securities are to be or have been offered.

 

     (c) Findings of fact and conclusions of law in a record in

 

accordance with the administrative procedures act of 1969, 1969 PA

 

306, MCL 24.201 to 24.328.

 

     (6) The administrator may modify or vacate a stop order issued

 

under this section if the administrator finds that the conditions

 

that caused its issuance have changed or that it is necessary or

 

appropriate in the public interest or for the protection of

 

investors.

 

     Sec. 307. The administrator may waive or modify, in whole or

 

in part, any or all of the requirements of sections 302, 303, and

 

304(2) or the requirement of any information or record in a

 

registration statement or in a periodic report filed pursuant to

 

section 305(9).

 

ARTICLE 4

 

BROKER-DEALERS, AGENTS, INVESTMENT ADVISERS, INVESTMENT ADVISER

 

REPRESENTATIVES, AND FEDERAL COVERED INVESTMENT ADVISERS

 

     Sec. 401. (1) A person shall not transact business in this

 

state as a broker-dealer unless the person is registered under this

 

act as a broker-dealer or is exempt from registration as a broker-

 

dealer under subsection (2) or (4).

 

     (2) The following persons are exempt from the registration

 

requirement of subsection (1):

 

     (a) A broker-dealer if the broker-dealer does not have a place

 

of business in this state and if the broker-dealer's only

 

transactions effected in this state are with any of the following:

 

     (i) The issuer of the securities involved in the transactions.

 

     (ii) A broker-dealer registered as a broker-dealer under this

 

act or not required to be registered as a broker-dealer under this

 

act.

 

     (iii) An institutional investor.

 

     (iv) A nonaffiliated federal covered investment adviser with

 

investments under management in excess of $100,000,000.00 acting

 

for the account of others pursuant to discretionary authority in a

 

signed record.

 

     (v) A bona fide preexisting customer whose principal place of

 

residence is not in this state and the broker-dealer is registered

 

as a broker-dealer under the securities exchange act of 1934 or not

 

required to be registered under the securities exchange act of 1934

 

and is registered under the securities act of the state in which

 

the customer maintains a principal place of residence.

 

     (vi) A bona fide preexisting customer whose principal place of

 

residence is in this state but who was not present in this state

 

when the customer relationship was established, if both of the

 

following are met:

 

     (A) The broker-dealer is registered under the securities

 

exchange act of 1934 or not required to be registered under the

 

securities exchange act of 1934 and is registered under the

 

securities laws of the state in which the customer relationship was

 

established and where the customer had maintained a principal place

 

of residence.

 

     (B) Within 45 days after the customer's first transaction in

 

this state, the person files an application for registration as a

 

broker-dealer in this state and a further transaction is not

 

effected more than 75 days after the date on which the application

 

is filed, or, if earlier, the date on which the administrator

 

notifies the person that the administrator has denied the

 

application for registration or has stayed the pendency of the

 

application for good cause.

 

     (vii) Not more than 3 customers in this state during the

 

previous 12 months, in addition to those specified in subparagraphs

 

(i) to (vi) and under subparagraph (viii), if the broker-dealer is

 

registered under the securities exchange act of 1934 or not

 

required to be registered under the securities exchange act of 1934

 

and is registered under the securities act of the state in which

 

the broker-dealer has its principal place of business.

 

     (viii) Any other person exempted by rule or order under this

 

act.

 

     (b) A person that deals solely in United States government

 

securities and is supervised as a dealer in government securities

 

by the board of governors of the federal reserve system, the

 

comptroller of the currency, the federal deposit insurance

 

corporation, or the office of thrift supervision.

 

     (c) A person licensed or registered as a mortgage broker,

 

mortgage lender, or mortgage servicer under the mortgage brokers,

 

lenders, and servicers licensing act, 1987 PA 173, MCL 445.1651 to

 

445.1684, in the offer or sale of mortgage loans as defined in

 

section 1a of the mortgage brokers, lenders, and servicers

 

licensing act, 1987 PA 173, MCL 445.1651a.

 

     (3) A broker-dealer, or an issuer engaged in offering,

 

offering to purchase, purchasing, or selling securities in this

 

state, shall not directly or indirectly employ or associate with an

 

individual to engage in an activity related to securities

 

transactions in this state if the registration of the individual is

 

suspended or revoked or the individual is barred from employment or

 

association with a broker-dealer, an issuer, an investment adviser,

 

or a federal covered investment adviser by an order of the

 

administrator under this act, the securities and exchange

 

commission, a securities regulator of another state, or a self-

 

regulatory organization. A broker-dealer or issuer does not violate

 

this subsection if the broker-dealer or issuer did not know and in

 

the exercise of reasonable care could not have known of the

 

suspension, revocation, or bar. If requested by a broker-dealer or

 

issuer and if good cause is shown, an order under this act may

 

modify or waive, in whole or in part, the application of the

 

prohibitions of this subsection.

 

     (4) A rule or order under this act may permit any of the

 

following:

 

     (a) A broker-dealer that is registered in Canada or other

 

foreign jurisdiction and that does not have a place of business in

 

this state to effect transactions in securities with or for, or

 

attempt to effect the purchase or sale of any securities by, any of

 

the following:

 

     (i) An individual from Canada or other foreign jurisdiction who

 

is temporarily present in this state and with whom the broker-

 

dealer had a bona fide customer relationship before the individual

 

entered the United States.

 

     (ii) An individual from Canada or other foreign jurisdiction

 

who is present in this state and whose transactions are in a self-

 

directed tax advantaged retirement plan of which the individual is

 

the holder or contributor in that foreign jurisdiction.

 

     (iii) An individual who is present in this state, with whom the

 

broker-dealer customer relationship arose while the individual was

 

temporarily or permanently resident in Canada or the other foreign

 

jurisdiction.

 

     (b) An agent who represents a broker-dealer that is exempt

 

under this subsection to effect transactions in securities or

 

attempt to effect the purchase or sale of any securities in this

 

state as permitted for a broker-dealer described in subsection

 

(4)(a).

 

     Sec. 402. (1) An individual shall not transact business in

 

this state as an agent unless the individual is registered under

 

this act as an agent or is exempt from registration as an agent

 

under subsection (2).

 

     (2) Each of the following individuals is exempt from the

 

registration requirement of subsection (1):

 

     (a) An individual who represents a broker-dealer in effecting

 

transactions in this state limited to those described in section

 

15(h)(2) of the securities exchange act of 1934, 15 USC 78o.

 

     (b) An individual who represents a broker-dealer that is

 

exempt under section 401(2) or (4).

 

     (c) An individual who represents an issuer with respect to an

 

offer or sale of the issuer's own securities or those of the

 

issuer's parent or any of the issuer's subsidiaries, and who is not

 

compensated in connection with the individual's participation by

 

the payment of commissions or other remuneration based, directly or

 

indirectly, on transactions in those securities.

 

     (d) An individual who represents an issuer and who effects

 

transactions in the issuer's securities exempted by section 202,

 

other than section 202(1)(k) or (n).

 

     (e) An individual who represents an issuer who effects

 

transactions solely in federal covered securities of the issuer,

 

but an individual who effects transactions in a federal covered

 

security under section 18(b)(3) or 18(b)(4)(D) of the securities

 

act of 1933, 15 USC 77r, is not exempt if the individual is

 

compensated in connection with the agent's participation by the

 

payment of commissions or other remuneration based, directly or

 

indirectly, on transactions in those securities.

 

     (f) An individual who represents a broker-dealer registered in

 

this state under section 401(1) or exempt from registration under

 

section 401(2) in the offer and sale of securities for an account

 

of a nonaffiliated federal covered investment adviser with

 

investments under management in excess of $100,000,000.00 acting

 

for the account of others pursuant to discretionary authority in a

 

signed record.

 

     (g) An individual who represents an issuer in connection with

 

the purchase of the issuer's own securities.

 

     (h) An individual who represents an issuer and who restricts

 

participation to performing clerical or ministerial acts.

 

     (i) An employee of a person licensed or registered under the

 

mortgage brokers, lenders, and servicers licensing act, 1987 PA

 

173, MCL 445.1651 to 445.1684, in the offer or sale of mortgage

 

loans as defined in section 1a of the mortgage brokers, lenders,

 

and servicers licensing act, 1987 PA 173, MCL 445.1651a, when

 

acting as an employee of the licensed or registered person.

 

     (j) Any other individual exempted by rule or order under this

 

act.

 

     (3) The registration of an agent is effective only while the

 

agent is employed by or associated with a broker-dealer registered

 

under this act or an issuer that is offering, selling, or

 

purchasing its securities in this state.

 

     (4) A broker-dealer, or an issuer engaged in offering,

 

selling, or purchasing securities in this state, shall not employ

 

or associate with an agent who transacts business in this state on

 

behalf of broker-dealers or issuers unless the agent is registered

 

under subsection (1) or exempt from registration under subsection

 

(2).

 

     (5) An individual shall not act as an agent for more than 1

 

broker-dealer or more than 1 issuer at a time, unless the broker-

 

dealers or the issuers for which the agent acts are affiliated by

 

direct or indirect common control or are authorized by rule or

 

order under this act.

 

     Sec. 403. (1) A person shall not transact business in this

 

state as an investment adviser unless the person is registered

 

under this act as an investment adviser or is exempt from

 

registration as an investment adviser under subsection (2).

 

     (2) The following persons are exempt from the registration

 

requirement of subsection (1):

 

     (a) A person that does not have a place of business in this

 

state and that is registered under the securities act of the state

 

in which the person has its principal place of business, if its

 

only clients in this state are any of the following:

 

     (i) Federal covered investment advisers, investment advisers

 

registered under this act, or broker-dealers registered under this

 

act.

 

     (ii) Institutional investors.

 

     (iii) Bona fide preexisting clients whose principal places of

 

residence are not in this state, if the investment adviser is

 

registered under the securities act of the state in which the

 

clients maintain principal places of residence.

 

     (iv) Any other client exempted by rule or order under this act.

 

     (b) A person that does not have a place of business in this

 

state if the person has had, during the preceding 12 months and in

 

addition to those described in subdivision (a), not more than 5

 

clients who are natural persons and residents of this state.

 

     (c) A person that does not hold itself out to the general

 

public as an investment adviser and that has had, during the

 

preceding 12 months and in addition to those described in

 

subdivision (a), not more than 5 clients who are natural persons,

 

who are residents of this state, and who are accredited investors

 

as defined in rule 501(a) under the securities act of 1933, 17 CFR

 

230.501.

 

     (d) The person is an investment adviser who is not required to

 

be registered as an investment adviser under the investment

 

advisers act of 1940 if the investment adviser's only clients in

 

this state are other investment advisers, federal covered advisers,

 

broker-dealers, or institutional investors.

 

     (e) Any other person exempted by rule or order under this act.

 

     (3) An investment adviser shall not, directly or indirectly,

 

employ or associate with an individual to engage in an activity

 

related to investment advice in this state if the registration of

 

the individual is suspended or revoked, or the individual is barred

 

from employment or association with an investment adviser, federal

 

covered investment adviser, or broker-dealer by an order under this

 

act, the securities and exchange commission, a securities regulator

 

of another state, or a self-regulatory organization, unless the

 

investment adviser did not know, and in the exercise of reasonable

 

care could not have known, of the suspension, revocation, or bar.

 

If the investment adviser request and good cause is shown, the

 

administrator, by order, may waive, in whole or in part, the

 

application of the prohibitions of this subsection.

 

     (4) An investment adviser shall not employ or associate with

 

an individual required to be registered under this act as an

 

investment adviser representative who transacts business in this

 

state on behalf of the investment adviser unless the individual is

 

registered under section 404(1) or is exempt from registration

 

under section 404(2).

 

     Sec. 404. (1) An individual shall not transact business in

 

this state as an investment adviser representative unless the

 

individual is registered under this act as an investment adviser

 

representative or is exempt from registration as an investment

 

adviser representative under subsection (2).

 

     (2) Each of the following individuals is exempt from the

 

registration requirement of subsection (1):

 

     (a) An individual who is employed by or associated with an

 

investment adviser that is exempt from registration under section

 

403(2) or a federal covered investment adviser that is excluded

 

from the notice filing requirements of section 405.

 

     (b) Any other individual exempted by rule or order under this

 

act.

 

     (3) The registration of an investment adviser representative

 

is not effective while the investment adviser representative is not

 

employed by or associated with an investment adviser registered

 

under this act or a federal covered investment adviser that has

 

made or is required to make a notice filing under section 405.

 

     (4) An individual may transact business as an investment

 

adviser representative for more than 1 investment adviser or

 

federal covered investment adviser unless a rule or order under

 

this act prohibits or limits an individual from acting as an

 

investment adviser representative for more than 1 investment

 

adviser or federal covered investment adviser.

 

     (5) An individual acting as an investment adviser

 

representative shall not, directly or indirectly, conduct business

 

in this state on behalf of an investment adviser or a federal

 

covered investment adviser if the registration of the individual as

 

an investment adviser representative is suspended or revoked or the

 

individual is barred from employment or association with an

 

investment adviser or a federal covered investment adviser by an

 

order under this act, the securities and exchange commission, a

 

securities regulator of another state, or a self-regulatory

 

organization. If a federal covered investment adviser requests and

 

good cause is shown, the administrator, by order, may waive, in

 

whole or in part, the application of the requirements of this

 

subsection.

 

     (6) An investment adviser registered under this act, a federal

 

covered investment adviser that has filed a notice under section

 

405, or a broker-dealer registered under this act is not required

 

to employ or associate with an individual as an investment adviser

 

representative if the only compensation paid to the individual for

 

a referral of investment advisory clients is paid to an investment

 

adviser registered under this act, a federal covered investment

 

adviser who has filed a notice under section 405, or a broker-

 

dealer registered under this act with which the individual is

 

employed or associated as an investment adviser representative.

 

     Sec. 405. (1) Except with respect to a federal covered

 

investment adviser described in subsection (2), a federal covered

 

investment adviser shall not transact business in this state as a

 

federal covered investment adviser unless the federal covered

 

investment adviser complies with subsection (3).

 

     (2) The following federal covered investment advisers are not

 

required to comply with subsection (3):

 

     (a) A federal covered investment adviser without a place of

 

business in this state if its only clients in this state are any of

 

the following:

 

     (i) Federal covered investment advisers, investment advisers

 

registered under this act, and broker-dealers registered under this

 

act.

 

     (ii) Institutional investors.

 

     (iii) Bona fide preexisting clients whose principal places of

 

residence are not in this state.

 

     (iv) Other clients specified by rule or order under this act.

 

     (b) A federal covered investment adviser that does not have a

 

place of business in this state if the federal covered investment

 

adviser has had, during the preceding 12 months, not more than 5

 

clients that are residents of this state in addition to those

 

specified under subdivision (a).

 

     (c) Any other person excluded by rule or order under this act.

 

     (3) A person acting as a federal covered investment adviser,

 

not excluded under subsection (2), shall file a notice, a consent

 

to service of process complying with section 611, and those records

 

that have been filed with the securities and exchange commission

 

under the investment advisers act of 1940 that are required by rule

 

or order under this act and pay the fees specified in section

 

410(5).

 

     (4) A notice under subsection (3) is effective on filing.

 

     Sec. 406. (1) A person shall register as a broker-dealer,

 

agent, investment adviser, or investment adviser representative by

 

filing an application and a consent to service of process complying

 

with section 611 and paying the fee specified in section 410 and

 

any reasonable fees charged by the designee of the administrator

 

for processing the filing. Each application must contain both of

 

the following:

 

     (a) The information or record required for the filing of a

 

uniform application.

 

     (b) If requested by the administrator, any other financial or

 

other information or record that the administrator determines is

 

appropriate.

 

     (2) If the information or record contained in an application

 

that is filed under subsection (1) is or becomes inaccurate or

 

incomplete in any material respect, the registrant shall promptly

 

file a correcting amendment.

 

     (3) If an order is not in effect and no proceeding is pending

 

under section 412, registration becomes effective at 12 noon on the

 

forty-fifth day after a completed application is filed unless the

 

registration is denied. A rule or order under this act may set an

 

earlier effective date or may defer the effective date until 12

 

noon on the forty-fifth day after the filing of any amendment

 

completing the application.

 

     (4) A registration is effective until 12 midnight on December

 

31 of the year for which the application for registration is filed.

 

Unless an order is in effect under section 412, a registration may

 

be automatically renewed each year by filing the records required

 

by rule or order under this act and paying the fee specified in

 

section 410 and the costs charged by the designee of the

 

administrator for processing the filings.

 

     (5) A rule or order under this act may impose other conditions

 

not inconsistent with the national securities markets improvement

 

act of 1996, Public Law 104-290, 110 Stat. 3416, or an order under

 

this act may waive, in whole or in part, specific requirements in

 

connection with registration if the imposition or waiver is

 

appropriate in the public interest and for the protection of

 

investors.

 

     Sec. 407. (1) A broker-dealer or investment adviser may

 

succeed to the current registration of another broker-dealer or

 

investment adviser or a notice filing of a federal covered

 

investment adviser, and a federal covered investment adviser may

 

succeed to the current registration of an investment adviser or

 

notice filing of another federal covered investment adviser, by

 

filing as a successor an application for registration under section

 

401 or 403, or a notice under section 405, for the unexpired

 

portion of the current registration or notice filing.

 

     (2) A broker-dealer or investment adviser that changes its

 

form of organization or state of incorporation or organization may

 

continue its registration by filing an amendment to its

 

registration if the change does not involve a material change in

 

its financial condition or management. The amendment is effective

 

when filed or on a date designated by the registrant in the filing.

 

The new organization is a successor to the original registrant for

 

the purposes of this act. If there is a material change in

 

financial condition or management, the broker-dealer or investment

 

adviser shall file a new application for registration. Any

 

predecessor registered under this act shall stop conducting its

 

securities business other than winding down transactions and shall

 

file for withdrawal of broker-dealer or investment adviser

 

registration within 45 days after filing its amendment to effect

 

succession.

 

     (3) A broker-dealer or investment adviser that changes its

 

name may continue its registration by filing an amendment to its

 

registration. The amendment is effective when filed or on a date

 

designated by the registrant.

 

     (4) A change of control of a broker-dealer or investment

 

adviser may be made in accordance with a rule or order under this

 

act.

 

     Sec. 408. (1) If an agent registered under this act terminates

 

employment by or association with a broker-dealer or issuer, or if

 

an investment adviser representative registered under this act

 

terminates employment by or association with an investment adviser

 

or federal covered investment adviser, or if either registrant

 

terminates activities that require registration as an agent or

 

investment adviser representative, the broker-dealer, investment

 

adviser, or federal covered investment adviser shall promptly file

 

a notice of termination. If the registrant learns that the broker-

 

dealer, issuer, investment adviser, or federal covered investment

 

adviser has not filed the notice, the registrant may file the

 

notice.

 

     (2) If an agent registered under this act terminates

 

employment by or association with a broker-dealer registered under

 

this act and begins employment by or association with another

 

broker-dealer registered under this act; or if an investment

 

adviser representative registered under this act terminates

 

employment by or association with an investment adviser registered

 

under this act or a federal covered investment adviser that has

 

filed a notice under section 405 and begins employment by or

 

association with another investment adviser registered under this

 

act or a federal covered investment adviser that has filed a notice

 

under section 405, then upon the filing by or on behalf of the

 

registrant, within 30 days after the termination, of an application

 

for registration that complies with the requirement of section

 

406(1) and payment of the filing fee required under section 410, 1

 

of the following applies to the registration of the agent or

 

investment adviser representative:

 

     (a) If the agent's central registration depository record or

 

successor record or the investment adviser representative's

 

investment adviser registration depository record or successor

 

record does not contain a new or amended disciplinary disclosure

 

within the previous 12 months, the registration is immediately

 

effective as of the date of the completed filing.

 

     (b) If the agent's central registration depository record or

 

the investment adviser representative's investment adviser

 

registration depository record contains a new or amended

 

disciplinary disclosure within the preceding 12 months, the

 

registration is temporarily effective as of the date of the

 

completed filing.

 

     (3) If there are or were grounds for discipline under section

 

412, the administrator may withdraw a temporary registration within

 

30 days after the application is filed. If the administrator does

 

not withdraw the temporary registration within the 30-day period,

 

registration becomes automatically effective on the thirty-first

 

day after filing.

 

     (4) The administrator may prevent the effectiveness of a

 

transfer of an agent or investment adviser representative under

 

subsection (2)(a) or (b) based on the public interest and the

 

protection of investors.

 

     (5) If the administrator determines that a registrant or

 

applicant for registration is no longer in existence, has ceased to

 

act as a broker-dealer, agent, investment adviser, or investment

 

adviser representative, is the subject of an adjudication of

 

incapacity, is subject to the control of a committee, conservator,

 

or guardian, or cannot reasonably be located, a rule or order under

 

this act may require the registration be canceled or terminated or

 

the application denied. The administrator may reinstate a canceled

 

or terminated registration, with or without hearing, and may make

 

the registration retroactive.

 

     Sec. 409. Withdrawal of registration by a broker-dealer,

 

agent, investment adviser, or investment adviser representative is

 

effective 60 days after an application to withdraw is filed or

 

within a shorter period as provided by rule or order under this

 

act, unless a revocation or suspension proceeding is pending when

 

the application is filed. If a proceeding is pending, withdrawal is

 

effective when and on conditions required by rule or order under

 

this act. The administrator may institute a revocation or

 

suspension proceeding under section 412 within 1 year after the

 

withdrawal became effective automatically and issue a revocation or

 

suspension order as of the last date on which registration was

 

effective if a proceeding is not pending.

 

     Sec. 410. (1) Before October 1, 2012, a person shall pay a fee

 

of $300.00 when initially filing an application for registration as

 

a broker-dealer and a fee of $300.00 when filing a renewal of

 

registration as a broker-dealer. After September 30, 2012, a person

 

shall pay a fee of $250.00 when initially filing an application for

 

registration as a broker-dealer and a fee of $250.00 when filing a

 

renewal of registration as a broker-dealer. If the filing results

 

in a denial or withdrawal, the administrator shall retain all of

 

the filing fee.

 

     (2) Before October 1, 2012, an individual shall pay a fee of

 

$65.00 when filing an application for registration as an agent, a

 

fee of $65.00 when filing a renewal of registration as an agent,

 

and a fee of $65.00 when filing for a change of registration as an

 

agent. After September 30, 2012, an individual shall pay a fee of

 

$30.00 when filing an application for registration as an agent, a

 

fee of $30.00 when filing a renewal of registration as an agent,

 

and a fee of $30.00 when filing for a change of registration as an

 

agent. If the filing results in a denial or withdrawal, the

 

administrator shall retain all of the filing fee.

 

     (3) Before October 1, 2012, a person shall pay a fee of

 

$200.00 when filing an application for registration as an

 

investment adviser and a fee of $200.00 when filing a renewal of

 

registration as an investment adviser. After September 30, 2012, a

 

person shall pay a fee of $150.00 when filing an application for

 

registration as an investment adviser and a fee of $150.00 when

 

filing a renewal of registration as an investment adviser. If the

 

filing results in a denial or withdrawal, the administrator shall

 

retain all of the filing fee.

 

     (4) Before October 1, 2012, an individual shall pay a fee of

 

$65.00 when filing an application for registration as an investment

 

adviser representative, a fee of $65.00 when filing a renewal of

 

registration as an investment adviser representative, and a fee of

 

$65.00 when filing a change of registration as an investment

 

adviser representative. After September 30, 2012, an individual

 

shall pay a fee of $30.00 when filing an application for

 

registration as an investment adviser representative, a fee of